KKR & Co. L.P. Announces Third Quarter 2012 Results

Strong investment appreciation continues to drive meaningful economic net income

GAAP net income (loss) attributable to KKR & Co. L.P. was $127.4 million and $464.1 million for the quarter and nine months ended September 30, 2012, respectively, up from ($243.4) million and ($44.2) million in the comparable periods of 2011.

Assets under management (“AUM”) totaled $66.3 billion as of September 30, 2012, up from $61.5 billion as of June 30, 2012.

Fee related earnings (“FRE”) were $90.7 million and $233.8 million for the quarter and nine months ended September 30, 2012, respectively, down from $98.2 million and $300.6 million in the comparable periods of 2011.

Total distributable earnings were $332.9 million and $903.1 million for the quarter and nine months ended September 30, 2012, respectively, up from $185.4 million and $636.1 million in the comparable periods of 2011.

Economic net income (loss) (“ENI”) was $509.9 million and $1,783.2 million for the quarter and nine months ended September 30, 2012, respectively, up from ($592.1) million and $465.5 million in the comparable periods of 2011.

After-tax ENI was $0.69 and $2.42 per adjusted unit for the quarter and nine months ended September 30, 2012, respectively, up from ($0.91) and $0.41 per adjusted unit in the comparable periods of 2011.

Book value was $6.9 billion on a segment basis as of September 30, 2012, representing $9.82 per adjusted unit.

KKR & Co. L.P. declares a third quarter distribution of $0.24 per common unit.

Previously announced acquisition of Prisma Capital Partners LP and its affiliates has closed.

NEW YORK--()--KKR & Co. L.P. (NYSE: KKR) today reported its third quarter 2012 results.

For the quarter and nine months ended September 30, 2012, the carrying value of KKR’s private equity investment portfolio appreciated 6.1% and 19.9%, respectively, driving meaningful ENI.

ENI was $509.9 million for the quarter ended September 30, 2012, an increase of $1,102.0 million compared to ENI of ($592.1) million for the quarter ended September 30, 2011. The increase was primarily attributable to the appreciation in the carrying value of our principal investments as well as net carried interest earned from our investment funds for the quarter ended September 30, 2012. For the quarter ended September 30, 2011, there was a decline in the carrying value of our principal investments and a reversal of previously recognized net carried interest due to a decline in the carrying value of our investment funds. ENI was $1,783.2 million for the nine months ended September 30, 2012, an increase of $1,317.7 million compared to ENI of $465.5 million for the nine months ended September 30, 2011. The increase was primarily due to a higher level of appreciation in the carrying value of our principal investments as well as higher net carried interest earned from our investment funds.

AUM was $66.3 billion as of September 30, 2012, an increase of $4.8 billion, or 7.8%, compared to AUM of $61.5 billion as of June 30, 2012. The increase was primarily attributable to new capital raised relating to North America Fund XI and to a lesser extent appreciation in the fair value of our investment vehicles. The increase was partially offset by distributions to limited partners of our investment funds and a reduction in AUM as a result of the 2006 Fund entering the post-investment period. Fee paying assets under management (“FPAUM”) was $50.3 billion as of September 30, 2012, an increase of $3.1 billion, or 6.6%, compared to FPAUM of $47.2 billion as of June 30, 2012. The increase was primarily attributable to new capital raised, partially offset by the reduction in fee base of the 2006 Fund as a result of the fund entering the post-investment period. During the third quarter of 2012, the investment period for the 2006 Fund came to a close, and thereafter, the North America Fund XI, the successor fund to the 2006 Fund, became active and is now our primary investment vehicle for North American private equity transactions. This brings total capital raised to date for the North America Fund XI to $6.2 billion, including GP and employee commitments. Neither AUM nor FPAUM include $4.0 billion (includes general partner commitment) of capital raised for our second Asian private equity fund.

On October 1, 2012, we closed on the acquisition of Prisma Capital Partners LP and its affiliates (“Prisma”), a leading provider of customized hedge fund solutions. Prisma will be reported as part of the Public Markets segment of KKR in the fourth quarter of 2012. This transaction is the first strategic acquisition in KKR’s history. The addition of Prisma provides KKR with a leading presence in the hedge fund of funds space and an attractive platform which we can leverage to create new, more liquid products for partners in our funds. As of September 30, 2012, Prisma had $8.1 billion of assets under management, which are not included in either AUM or FPAUM.

“We are pleased with the firm's performance for the nine months through September 30. Our private equity funds appreciated by 20% and our balance sheet investments appreciated by 22%, outperforming the MSCI World Index by over 600 and 800 basis points, respectively,” said Henry R. Kravis and George R. Roberts, Co-Chairmen and Co-Chief Executive Officers of KKR. “In addition, with the closing of the Prisma acquisition, we welcome the Prisma employees into the KKR family and look forward to bringing the capabilities of both organizations to bear in the marketplace.”

 

Note: Certain financial measures, including FRE, ENI, after-tax ENI, after-tax ENI per adjusted unit, fee related EBITDA, book value, cash and short-term investments and adjusted units, are not presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). See Exhibits A and B for a reconciliation of such measures to financial results prepared in accordance with GAAP. See calculation and reconciliation of total distributable earnings under “Distribution Calculation.”
 

GAAP RESULTS

GAAP results for the quarter and nine months ended September 30, 2012 included net income attributable to KKR & Co. L.P. of $127.4 million and $464.1 million, respectively, and net income attributable to KKR & Co. L.P. per common unit of $0.49 and $1.86, respectively, on a diluted basis. For the quarter and nine months ended September 30, 2011, net loss attributable to KKR & Co. L.P. was ($243.4) million and ($44.2) million, respectively, and net loss attributable to KKR & Co. L.P. per common unit was ($1.09) and ($0.20), respectively, on a diluted basis. The increases in both comparable periods were primarily due to a greater level of investment appreciation for the three and nine months ended September 30, 2012 compared to the three and nine months ended September 30, 2011. This increase in investment appreciation, which is recorded in net gains (losses) from investment activities, was partially offset by an increase in compensation and benefits expense.

SEGMENT RESULTS

Private Markets

AUM was $49.8 billion as of September 30, 2012, an increase of $4.3 billion, or 9.5%, compared to AUM of $45.5 billion as of June 30, 2012. The increase was primarily attributable to new capital raised from the North America Fund XI and to a lesser extent appreciation in the fair value of our private equity portfolio. The increases were partially offset by distributions to the limited partners of our private equity funds arising from realizations as well as a reduction in AUM as a result of the 2006 Fund entering the post-investment period.

FPAUM was $40.4 billion as of September 30, 2012, an increase of $2.5 billion, or 6.6%, compared to FPAUM of $37.9 billion as of June 30, 2012. The increase was primarily due to new capital raised from the North America Fund XI, partially offset by the reduction in the fee base of the 2006 Fund as a result of the fund entering the post-investment period.

FRE was $44.7 million for the quarter ended September 30, 2012, an increase of $3.5 million, or 8.5%, compared to FRE of $41.2 million for the quarter ended September 30, 2011. The increase was primarily attributable to a higher level of monitoring fees and lower operating expenses.

FRE was $118.6 million for the nine months ended September 30, 2012, a decrease of $51.0 million, or 30.1%, compared to FRE of $169.6 million for the nine months ended September 30, 2011. The decrease was primarily driven by (i) lower monitoring fees as a result of $76.6 million of termination payments on monitoring agreements with three portfolio companies during the nine months ended September 30, 2011, which impacted FRE by $39.7 million net of associated fee credits and (ii) lower transaction fees during the nine months ended September 30, 2012 as a result of closing relatively smaller transaction fee-generating investments, which in turn produced lower transaction fees.

ENI was $213.9 million for the quarter ended September 30, 2012, an increase of $365.9 million compared to ENI of ($152.0) million for the quarter ended September 30, 2011. The increase was primarily attributable to net carried interest recognized for the quarter ended September 30, 2012 driven by the appreciation in our private equity portfolio. For the quarter ended September 30, 2011, there was a reversal of previously recognized net carried interest due to a decline in the carrying value of our private equity funds.

ENI was $653.9 million for the nine months ended September 30, 2012, an increase of $401.0 million compared to ENI of $252.9 million for the nine months ended September 30, 2011. The increase was primarily driven by higher net carried interest resulting from a higher level of appreciation in our private equity portfolio, partially offset by the decrease in FRE discussed above.

Public Markets

AUM was $16.5 billion as of September 30, 2012, an increase of $0.5 billion, or 3.1%, compared to AUM of $16.0 billion as of June 30, 2012. FPAUM was $9.9 billion as of September 30, 2012, an increase of $0.6 billion, or 6.5%, compared to FPAUM of $9.3 billion as of June 30, 2012. The increases in both AUM and FPAUM were primarily attributable to new capital raised and to a lesser extent appreciation in the net asset value of certain investment vehicles. The increases in both AUM and FPAUM were partially offset by distributions to credit strategy investors.

FRE was $23.3 million for the quarter ended September 30, 2012, an increase of $10.9 million, or 87.9%, compared to FRE of $12.4 million for the quarter ended September 30, 2011. FRE was $51.1 million for the nine months ended September 30, 2012, an increase of $3.3 million, or 6.9%, compared to FRE of $47.8 million for the nine months ended September 30, 2011. The increase in both comparable periods was primarily due to higher incentive fees earned, partially offset by higher compensation and occupancy and related charges.

ENI was $34.9 million for the quarter ended September 30, 2012, an increase of $26.0 million compared to ENI of $8.9 million for the quarter ended September 30, 2011. ENI was $65.6 million for the nine months ended September 30, 2012, an increase of $19.5 million compared to ENI of $46.1 million for the nine months ended September 30, 2011. The increase in both comparable periods was primarily attributable to the increase in FRE discussed above and net carried interest recognized for the quarter and nine months ended September 30, 2012 driven by the appreciation in the net asset value of certain carry-eligible investment vehicles. For the quarter ended September 30, 2011, there was a reversal of previously recognized net carried interest due to a decline in the carrying value of certain carry-eligible investment vehicles.

Capital Markets and Principal Activities

FRE was $22.7 million for the quarter ended September 30, 2012, a decrease of $21.9 million, or 49.1%, compared to FRE of $44.6 million for the quarter ended September 30, 2011. FRE was $64.2 million for the nine months ended September 30, 2012, a decrease of $19.0 million, or 22.8%, compared to FRE of $83.2 million for the nine months ended September 30, 2011. The decrease in both comparative periods was primarily driven by a lower level of overall capital markets transaction activity.

ENI was $261.1 million for the quarter ended September 30, 2012, an increase of $710.1 million compared to ENI of ($449.0) million for the quarter ended September 30, 2011. The increase was principally attributable to the appreciation in the carrying value of our principal investments for the quarter ended September 30, 2012 as compared to a decline in the carrying value of our principal investments for the quarter ended September 30, 2011.

ENI was $1,063.7 million for the nine months ended September 30, 2012, an increase of $897.3 million compared to ENI of $166.4 million for the nine months ended September 30, 2011. The increase was primarily driven by a higher level of appreciation in the carrying value of our principal investments.

CAPITAL AND LIQUIDITY

As of September 30, 2012, KKR had $1,438.3 million of cash and short-term investments on a segment basis and $500.0 million of outstanding debt obligations under its senior notes. KKR’s availability for further borrowings was approximately $750.0 million (which does not include a $500.0 million revolving credit facility for use in its capital markets business that was undrawn as of September 30, 2012).

As of September 30, 2012, KKR’s portion of total uncalled commitments to its investment funds was $802.7 million, consisting of the following (amounts in thousands):

  Uncalled
Commitments

Private Markets

European Fund III $ 243,400
North America Fund XI 241,600
2006 Fund 102,000
Asian Fund 45,400
Infrastructure 36,300
E2 Investors (Annex Fund) 28,000
Natural Resources 13,400
China Growth Fund 6,400
Other Private Markets Commitments   3,600
Total Private Markets Commitments   720,100
 

Public Markets

Direct Lending Fund 45,900
Mezzanine Fund 29,800
Special Situations Vehicles   6,900
Total Public Markets Commitments   82,600
 
Total Uncalled Commitments $ 802,700
 

DISTRIBUTION

A distribution of $0.24 per common unit will be paid on November 20, 2012 to unitholders of record as of the close of business on November 5, 2012.

CONFERENCE CALL

A conference call to discuss KKR’s financial results will be held on Friday, October 26, 2012 at 10:00 a.m. EDT. The conference call may be accessed by dialing (877) 303-2917 (U.S. callers) or +1 (253) 237-1135 (non-U.S. callers); a pass code is not required. Additionally, the conference call will be broadcast live over the Internet and may be accessed through the Public Investors section of KKR’s website at http://ir.kkr.com/kkr_ir/kkr_events.cfm. A replay of the live broadcast will be available on KKR’s website or by dialing (855) 859-2056 (U.S. callers) and +1 (404) 537-3406 (non-U.S. callers), pass code 39815272, beginning approximately two hours after the broadcast.

From time to time, KKR may use its website as a channel of distribution of material company information. Financial and other important information regarding KKR is routinely posted and accessible on the Public Investors section of KKR’s website at http://ir.kkr.com/kkr_ir/alerts.cfm. In addition, you may automatically receive email alerts and other information about KKR by enrolling your email address at the “Email Alerts” area of the Public Investors section of the website.

ABOUT KKR

Founded in 1976 and led by Henry Kravis and George Roberts, KKR is a leading global investment firm with $66.3 billion in assets under management as of September 30, 2012. With offices around the world, KKR manages assets through a variety of investment funds and accounts covering multiple asset classes. KKR seeks to create value by bringing operational expertise to its portfolio companies and through active oversight and monitoring of its investments. KKR complements its investment expertise and strengthens interactions with investors through its client relationships and capital markets platform. KKR is publicly traded on the New York Stock Exchange (NYSE: KKR). For additional information, please visit KKR’s website at www.kkr.com.

FORWARD-LOOKING STATEMENTS

This release contains certain forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. The forward-looking statements are based on KKR’s beliefs, assumptions and expectations of its future performance, taking into account all information currently available to it. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to KKR or are within its control. If a change occurs, KKR’s business, financial condition, liquidity and results of operations, including but not limited to AUM, FPAUM, FRE, total distributable earnings, ENI, after-tax ENI, fee related EBITDA, committed and syndicated dollars invested, uncalled commitments, core interest expense, cash and short-term investments and book value, may vary materially from those expressed in the forward-looking statements. The following factors, among others, could cause actual results to vary from the forward-looking statements: the general volatility of the capital markets; failure to realize the benefits of or changes in KKR’s business strategies including the ability to realize the anticipated synergies from the acquisitions such as Prisma; availability, terms and deployment of capital; availability of qualified personnel and expense of recruiting and retaining such personnel; changes in the asset management industry, interest rates or the general economy; underperformance of KKR's investments and decreased ability to raise funds; and the degree and nature of KKR’s competition. KKR does not undertake any obligation to update any forward-looking statements to reflect circumstances or events that occur after the date on which such statements were made except as required by law. In addition, KKR’s business strategy is focused on the long term and financial results are subject to significant volatility. Additional information about factors affecting KKR is available in KKR & Co. L.P.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011, filed with the SEC on February 27, 2012, and other filings with the SEC, which are available at www.sec.gov.

       
KKR
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (GAAP BASIS - UNAUDITED)
(Amounts in thousands, except common unit and per common unit amounts)
 
Quarter Ended Nine Months Ended
September 30, 2012 September 30, 2011 September 30, 2012 September 30, 2011
Revenues
Fees $ 162,154   $ 164,808   $ 390,821   $ 514,263  
 
Expenses
Compensation and Benefits 366,350 48,948 1,019,400 677,917
Occupancy and Related Charges 14,344 13,702 43,636 39,085
General, Administrative and Other   65,825     66,180     177,480     166,866  
Total Expenses   446,519     128,830     1,240,516     883,868  

 

Investment Income (Loss)
Net Gains (Losses) from Investment Activities 2,308,613 (3,339,020 ) 6,997,166 467,278
Dividend Income 10,440 71,106 263,298 107,129
Interest Income 95,578 64,858 259,669 218,975
Interest Expense   (17,868 )   (17,742 )   (52,757 )   (52,365 )
Total Investment Income (Loss)   2,396,763     (3,220,798 )   7,467,376     741,017  
 
Income (Loss) Before Taxes 2,112,398 (3,184,820 ) 6,617,681 371,412
 
Income Taxes   9,612     11,535     37,777     67,923  
 
Net Income (Loss) 2,102,786 (3,196,355 ) 6,579,904 303,489
 
Net Income (Loss) Attributable to
Redeemable Noncontrolling Interests 9,994 - 18,551 -
Net Income (Loss) Attributable to
Noncontrolling Interests 1,965,381 (2,952,953 ) 6,097,245 347,705
       
Net Income (Loss) Attributable to KKR & Co. L.P. $ 127,411   $ (243,402 ) $ 464,108   $ (44,216 )
 
Distributions Declared per KKR & Co. L.P. Common Unit $ 0.24 $ 0.10 $ 0.52 $ 0.42
 
Net Income (Loss) Attributable to KKR & Co. L.P. Per Common Unit
Basic $ 0.53 $ (1.09 ) $ 1.98 $ (0.20 )
Diluted (a) $ 0.49 $ (1.09 ) $ 1.86 $ (0.20 )
Weighted Average Common Units Outstanding
Basic 239,696,358 222,733,648 234,876,879 218,501,107
Diluted (a) 257,646,622 222,733,648 249,359,200 218,501,107
     
(a)   KKR Holdings L.P. units have been excluded from the calculation of diluted earnings per common unit given that the exchange of these units would proportionally increase KKR & Co. L.P.’s interests in KKR’s business and would have an anti-dilutive effect on earnings per common unit as a result of certain tax benefits KKR & Co. L.P. is assumed to receive upon the exchange. For the three and nine months ended September 30, 2011, equity awards granted under the KKR & Co. L.P. 2010 Equity Incentive Plan have been excluded from the calculation of diluted earnings per common unit given the awards would have an anti-dilutive effect as a result of the net loss incurred in the respective periods.
 

 
KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
(Amounts in thousands, except unit and per unit amounts)
               
Quarter Ended Nine Months Ended
September 30, 2012 June 30, 2012 September 30, 2011 September 30, 2012 September 30, 2011
Fees
Management and incentive fees:
Management fees $ 126,483 $ 129,626 $ 134,049 $ 384,752 $ 387,828
Incentive fees   17,768     4,057     -     31,495     28,159  
Management and incentive fees   144,251     133,683     134,049     416,247     415,987  
 
Monitoring and transaction fees:
Monitoring fees 29,969 27,786 20,892 83,577 141,972
Transaction fees 75,264 43,706 98,631 163,268 220,792
Fee credits   (31,707 )   (16,689 )   (28,793 )   (67,739 )   (113,996 )
Net monitoring and transaction fees   73,526     54,803     90,730     179,106     248,768  
 
Total fees   217,777     188,486     224,779     595,353     664,755  
 
Expenses
Compensation and benefits 71,340 62,746 66,663 196,810 192,913
Occupancy and related charges 13,605 13,239 12,675 41,305 36,656
Other operating expenses   42,128     42,729     47,199     123,406     134,608  
Total expenses (a)   127,073     118,714     126,537     361,521     364,177  
 
Fee Related Earnings   90,704     69,772     98,242     233,832     300,578  
 
Investment income (loss)
Gross carried interest 410,736 282,874 (366,387 ) 1,162,974 167,118
Less: allocation to KKR carry pool (169,633 ) (112,553 ) 151,191 (473,692 ) (67,915 )
Less: management fee refunds (b)   (61,499 )   (32,804 )   21,115     (135,011 )   (15,594 )
Net carried interest 179,604 137,517 (194,081 ) 554,271 83,609
Other investment income (loss)   240,876     340,103     (494,412 )   1,000,886     85,719  
Total investment income (loss)   420,480     477,620     (688,493 )   1,555,157     169,328  
 
Income (Loss) before noncontrolling interests
in Income of consolidated entities 511,184 547,392 (590,251 ) 1,788,989 469,906
Income (Loss) attributable to
noncontrolling interests   1,310     1,277     1,840     5,798     4,451  
 
Economic Net Income (Loss) $ 509,874   $ 546,115   $ (592,091 ) $ 1,783,191   $ 465,455  
 
Provision for Income Taxes 22,548 25,857 29,634 91,788 188,094
 
Economic Net Income (Loss), After Taxes (c) $ 487,326   $ 520,258   $ (621,725 ) $ 1,691,403   $ 277,361  
 
Economic Net Income (Loss), After Taxes per Adjusted Unit (c) $ 0.69 $ 0.74 $ (0.91 ) $ 2.42 $ 0.41
                           
Assets Under Management $ 66,278,700 $ 61,488,900 $ 58,720,800 $ 66,278,700 $ 58,720,800
Fee Paying Assets Under Management $ 50,266,000 $ 47,200,500 $ 46,221,200 $ 50,266,000 $ 46,221,200
Committed Dollars Invested and Syndicated Capital $ 926,000 $ 680,200 $ 2,653,200 $ 2,639,200 $ 4,706,100
Uncalled Commitments   $ 15,845,900     $ 10,610,300     $ 12,807,200     $ 15,845,900     $ 12,807,200  
                           

Other Information

Fee Related Earnings $ 90,704 $ 69,772 $ 98,242 $ 233,832 $ 300,578
Plus: depreciation and amortization   3,273     3,093     2,147     8,919     7,397  
Fee Related EBITDA $ 93,977   $ 72,865   $ 100,389   $ 242,751   $ 307,975  
 
Distributed Earnings $ 187,174 $ 104,548 $ 104,395 $ 403,208 $ 400,581
Plus: Net realized principal investment income   145,700     301,580     81,001     499,898     235,525  
Total Distributable Earnings (c) $ 332,874   $ 406,128   $ 185,396   $ 903,106   $ 636,106  
 
GAAP interest expense $ 17,868 $ 16,884 $ 17,742 $ 52,757 $ 52,365
Less: interest expense related to debt obligations
from investment financing arrangements   8,502     7,461     7,233     24,036     20,562  
Core Interest Expense (c) $ 9,366   $ 9,423   $ 10,509   $ 28,721   $ 31,803  
                                         
     
(a)   Excludes a $17.4 million, $14.1 million and $6.8 million charge for non-cash equity based compensation during the quarters ended September 30, 2012, June 30, 2012, and September 30, 2011, respectively, associated with equity awards granted under the KKR & Co. L.P. 2010 Equity Incentive Plan. Excludes a $47.8 million and $11.2 million charge for non-cash equity based compensation during the nine months ended September 30, 2012 and 2011, respectively, associated with equity awards granted under the KKR & Co. L.P. 2010 Equity Incentive Plan.
(b) As of September 30, 2012, there is no carried interest subject to management fee refunds, which may reduce carried interest in future periods.
(c) See definitions for after-tax ENI, adjusted units, total distributable earnings, and core interest expense under “Notes to Reportable Segments.”
 

 
KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
PRIVATE MARKETS SEGMENT (UNAUDITED)
(Amounts in thousands)
               
Quarter Ended Nine Months Ended
September 30, 2012 June 30, 2012 September 30, 2011 September 30, 2012 September 30, 2011
Fees
Management and incentive fees:
Management fees $ 105,035 $ 107,170 $ 106,748 $ 319,117 $ 323,684
Incentive fees   -     -     -     -     -  
Management and incentive fees   105,035     107,170     106,748     319,117     323,684  
 
Monitoring and transaction fees:
Monitoring fees 29,969 27,786 20,892 83,577 141,972
Transaction fees 32,788 10,768 40,196 55,223 101,506
Fee credits   (26,293 )   (15,642 )   (27,229 )   (59,641 )   (110,129 )
Net monitoring and transaction fees   36,464     22,912     33,859     79,159     133,349  
 
Total fees   141,499     130,082     140,607     398,276     457,033  
 
Expenses
Compensation and benefits 48,905 45,991 47,390 139,382 139,570
Occupancy and related charges 12,049 11,633 11,273 36,487 32,792
Other operating expenses   35,885     36,230     40,768     103,790     115,076  
Total expenses   96,839     93,854     99,431     279,659     287,438  
 
Fee Related Earnings   44,660     36,228     41,176     118,617     169,595  
 
Investment income (loss)
Gross carried interest 391,168 291,786 (360,282 ) 1,137,459 170,096
Less: allocation to KKR carry pool (161,805 ) (116,118 ) 148,749 (463,485 ) (69,106 )
Less: management fee refunds   (61,499 )   (32,804 )   21,115     (135,011 )   (15,594 )
Net carried interest 167,864 142,864 (190,418 ) 538,963 85,396
Other investment income (loss)   1,779     (3,990 )   (1,942 )   (559 )   (185 )
Total investment income (loss)   169,643     138,874     (192,360 )   538,404     85,211  
 
Income (Loss) before noncontrolling interests
in Income of consolidated entities 214,303 175,102 (151,184 ) 657,021 254,806
Income (Loss) attributable to
noncontrolling interests   444     358     790     3,098     1,885  
 
Economic Net Income (Loss) $ 213,859   $ 174,744   $ (151,974 ) $ 653,923   $ 252,921  
 
 
Assets Under Management $ 49,771,000 $ 45,528,100 $ 43,744,400 $ 49,771,000 $ 43,744,400
Fee Paying Assets Under Management $ 40,354,200 $ 37,858,300 $ 37,936,800 $ 40,354,200 $ 37,936,800
Committed Dollars Invested $ 623,000 $ 606,300 $ 1,654,900 $ 1,805,500 $ 2,884,900
Uncalled Commitments $ 14,594,700 $ 9,304,500 $ 11,243,600 $ 14,594,700 $ 11,243,600
 

 
KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
PUBLIC MARKETS SEGMENT (UNAUDITED)
(Amounts in thousands)
             
Quarter Ended Nine Months Ended
September 30, 2012 June 30, 2012 September 30, 2011 September 30, 2012 September 30, 2011
Fees
Management and incentive fees:
Management fees $ 21,448 $ 22,456 $ 27,301 $ 65,635 $ 64,144
Incentive fees   17,768     4,057     -     31,495     28,159  
Management and incentive fees   39,216     26,513     27,301     97,130     92,303  
 
Monitoring and transaction fees:
Monitoring fees - - - - -
Transaction fees 8,780 1,319 3,760 12,521 7,845
Fee credits   (5,414 )   (1,047 )   (1,564 )   (8,098 )   (3,867 )
Net monitoring and transaction fees   3,366     272     2,196     4,423     3,978  
 
Total fees   42,582     26,785     29,497     101,553     96,281  
 
Expenses
Compensation and benefits 13,997 9,229 12,144 34,608 33,967
Occupancy and related charges 1,343 1,366 1,097 4,127 2,870
Other operating expenses   3,897     3,880     3,807     11,754     11,649  
Total expenses   19,237     14,475     17,048     50,489     48,486  
 
Fee Related Earnings   23,345     12,310     12,449     51,064     47,795  
 
Investment income (loss)
Gross carried interest 19,568 (8,912 ) (6,105 ) 25,515 (2,978 )
Less: allocation to KKR carry pool (7,828 ) 3,565 2,442 (10,207 ) 1,191
Less: management fee refunds   -     -     -     -     -  
Net carried interest 11,740 (5,347 ) (3,663 ) 15,308 (1,787 )
Other investment income (loss)   25     (12 )   288     (10 )   598  
Total investment income (loss)   11,765     (5,359 )   (3,375 )   15,298     (1,189 )
 
Income (Loss) before noncontrolling interests
in Income of consolidated entities 35,110 6,951 9,074 66,362 46,606
Income (Loss) attributable to
noncontrolling interests   233     123     164     787     480  
 
Economic Net Income (Loss) $ 34,877   $ 6,828   $ 8,910   $ 65,575   $ 46,126  
 
Assets Under Management $ 16,507,700 $ 15,960,800 $ 14,976,400 $ 16,507,700 $ 14,976,400
Fee Paying Assets Under Management $ 9,911,800 $ 9,342,200 $ 8,284,400 $ 9,911,800 $ 8,284,400
Committed Dollars Invested $ 278,300 $ 73,900 $ 152,300 $ 558,400 $ 546,500
Uncalled Commitments $ 1,251,200 $ 1,305,800 $ 1,563,600 $ 1,251,200 $ 1,563,600
 

 
KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
CAPITAL MARKETS AND PRINCIPAL ACTIVITIES SEGMENT (UNAUDITED)
(Amounts in thousands)
             
Quarter Ended Nine Months Ended
September 30, 2012 June 30, 2012 September 30, 2011 September 30, 2012 September 30, 2011
Fees
Management and incentive fees:
Management fees $

-

$ - $ - $ - $ -
Incentive fees   -   -   -     -   -
Management and incentive fees   -   -   -     -   -
 
Monitoring and transaction fees:
Monitoring fees - - - - -
Transaction fees 33,696 31,619 54,675 95,524 111,441
Fee credits   -   -   -     -   -
Net monitoring and transaction fees   33,696   31,619   54,675     95,524   111,441
 
Total fees   33,696   31,619   54,675     95,524   111,441
 
Expenses
Compensation and benefits 8,438 7,526 7,129 22,820 19,376
Occupancy and related charges 213 240 305 691 994
Other operating expenses   2,346   2,619   2,624     7,862   7,883
Total expenses   10,997   10,385   10,058     31,373   28,253
 
Fee Related Earnings   22,699   21,234   44,617     64,151   83,188
 
Investment income (loss)
Gross carried interest - - - - -
Less: allocation to KKR carry pool - - - - -
Less: management fee refunds   -   -   -     -   -
Net carried interest - - - - -
Other investment income (loss)   239,072   344,105   (492,758 )   1,001,455   85,306
Total investment income (loss)   239,072   344,105   (492,758 )   1,001,455   85,306
 
Income (Loss) before noncontrolling interests
in Income of consolidated entities 261,771 365,339 (448,141 ) 1,065,606 168,494
Income (Loss) attributable to
noncontrolling interests   633   796   886     1,913   2,086
 
Economic Net Income (Loss) $ 261,138 $ 364,543 $ (449,027 ) $ 1,063,693 $ 166,408
 
 
Syndicated Capital $ 24,700 $ - $ 846,000 $ 275,300 $ 1,274,700
 

 
KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
Quarter Ended September 30, 2012
(Amounts in thousands)
             
Capital Markets Total
Private Markets Public Markets and Principal Reportable
Segment Segment Activities Segment Segments
 
Fees
Management and incentive fees:
Management fees $ 105,035 $ 21,448 $ - $ 126,483
Incentive fees   -     17,768     -   17,768  
Management and incentive fees   105,035     39,216     -   144,251  
 
Monitoring and transaction fees:
Monitoring fees 29,969 - - 29,969
Transaction fees 32,788 8,780 33,696 75,264
Fee credits   (26,293 )   (5,414 )   -   (31,707 )
Net monitoring and transaction fees   36,464     3,366     33,696   73,526  
 
Total fees   141,499     42,582     33,696   217,777  
 
Expenses
Compensation and benefits 48,905 13,997 8,438 71,340
Occupancy and related charges 12,049 1,343 213 13,605
Other operating expenses   35,885     3,897     2,346   42,128  
Total expenses   96,839     19,237     10,997   127,073  
 
Fee Related Earnings   44,660     23,345     22,699   90,704  
 
Investment income (loss)
Gross carried interest 391,168 19,568 - 410,736
Less: allocation to KKR carry pool (161,805 ) (7,828 ) - (169,633 )
Less: management fee refunds   (61,499 )   -     -   (61,499 )
Net carried interest 167,864 11,740 - 179,604
Other investment income (loss)   1,779     25     239,072   240,876  
Total investment income (loss)   169,643     11,765     239,072   420,480  
 
Income (Loss) before noncontrolling interests
in Income of consolidated entities 214,303 35,110 261,771 511,184
Income (Loss) attributable to
noncontrolling interests 444 233 633 1,310
       
Economic Net Income (Loss) $ 213,859   $ 34,877   $ 261,138 $ 509,874  
 

 
KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
Quarter Ended June 30, 2012
(Amounts in thousands)
             
Capital Markets Total
Private Markets Public Markets and Principal Reportable
Segment Segment Activities Segment Segments
 
Fees
Management and incentive fees:
Management fees $ 107,170 $ 22,456 $ - $ 129,626
Incentive fees   -     4,057     -   4,057  
Management and incentive fees   107,170     26,513     -   133,683  
 
Monitoring and transaction fees:
Monitoring fees 27,786 - - 27,786
Transaction fees 10,768 1,319 31,619 43,706
Fee credits   (15,642 )   (1,047 )   -   (16,689 )
Net monitoring and transaction fees   22,912     272     31,619   54,803  
 
Total fees   130,082     26,785     31,619   188,486  
 
Expenses
Compensation and benefits 45,991 9,229 7,526 62,746
Occupancy and related charges 11,633 1,366 240 13,239
Other operating expenses   36,230     3,880     2,619   42,729  
Total expenses   93,854     14,475     10,385   118,714  
 
Fee Related Earnings   36,228     12,310     21,234   69,772  
 
Investment income (loss)
Gross carried interest 291,786 (8,912 ) - 282,874
Less: allocation to KKR carry pool (116,118 ) 3,565 - (112,553 )
Less: management fee refunds   (32,804 )   -     -   (32,804 )
Net carried interest 142,864 (5,347 ) - 137,517
Other investment income (loss)   (3,990 )   (12 )   344,105   340,103  
Total investment income (loss)   138,874     (5,359 )   344,105   477,620  
 
Income (Loss) before noncontrolling interests
in Income of consolidated entities 175,102 6,951 365,339 547,392
Income (Loss) attributable to
noncontrolling interests 358 123 796 1,277
       
Economic Net Income (Loss) $ 174,744   $ 6,828   $ 364,543 $ 546,115  
 

 
KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
Quarter Ended September 30, 2011
(Amounts in thousands)
             
Capital Markets Total
Private Markets Public Markets and Principal Reportable
Segment Segment Activities Segment Segments
 
Fees
Management and incentive fees:
Management fees $ 106,748 $ 27,301 $ - $ 134,049
Incentive fees   -     -     -     -  
Management and incentive fees   106,748     27,301     -     134,049  
 
Monitoring and transaction fees:
Monitoring fees 20,892 - - 20,892
Transaction fees 40,196 3,760 54,675 98,631
Fee credits   (27,229 )   (1,564 )   -     (28,793 )
Net monitoring and transaction fees   33,859     2,196     54,675     90,730  
 
Total fees   140,607     29,497     54,675     224,779  
 
Expenses
Compensation and benefits 47,390 12,144 7,129 66,663
Occupancy and related charges 11,273 1,097 305 12,675
Other operating expenses   40,768     3,807     2,624     47,199  
Total expenses   99,431     17,048     10,058     126,537  
 
Fee Related Earnings   41,176     12,449     44,617     98,242  
 
Investment income (loss)
Gross carried interest (360,282 ) (6,105 ) - (366,387 )
Less: allocation to KKR carry pool 148,749 2,442 - 151,191
Less: management fee refunds   21,115     -     -     21,115  
Net carried interest (190,418 ) (3,663 ) - (194,081 )
Other investment income (loss)   (1,942 )   288     (492,758 )   (494,412 )
Total investment income (loss)   (192,360 )   (3,375 )   (492,758 )   (688,493 )
 
Income (Loss) before noncontrolling interests
in Income of consolidated entities (151,184 ) 9,074 (448,141 ) (590,251 )
Income (Loss) attributable to
noncontrolling interests 790 164 886 1,840
       
Economic Net Income (Loss) $ (151,974 ) $ 8,910   $ (449,027 ) $ (592,091 )
 

 
KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
Nine Months Ended September 30, 2012
(Amounts in thousands)
             
Capital Markets Total
Private Markets Public Markets and Principal Reportable
Segment Segment Activities Segment Segments
 
Fees
Management and incentive fees:
Management fees $ 319,117 $ 65,635 $ - $ 384,752
Incentive fees   -     31,495     -   31,495  
Management and incentive fees   319,117     97,130     -   416,247  
 
Monitoring and transaction fees:
Monitoring fees 83,577 - - 83,577
Transaction fees 55,223 12,521 95,524 163,268
Fee credits   (59,641 )   (8,098 )   -   (67,739 )
Net monitoring and transaction fees   79,159     4,423     95,524   179,106  
 
Total fees   398,276     101,553     95,524   595,353  
 
Expenses
Compensation and benefits 139,382 34,608 22,820 196,810
Occupancy and related charges 36,487 4,127 691 41,305
Other operating expenses   103,790     11,754     7,862   123,406  
Total expenses   279,659     50,489     31,373   361,521  
 
Fee Related Earnings   118,617     51,064     64,151   233,832  
 
Investment income (loss)
Gross carried interest 1,137,459 25,515 - 1,162,974
Less: allocation to KKR carry pool (463,485 ) (10,207 ) - (473,692 )
Less: management fee refunds   (135,011 )   -     -   (135,011 )
Net carried interest 538,963 15,308 - 554,271
Other investment income (loss)   (559 )   (10 )   1,001,455   1,000,886  
Total investment income (loss)   538,404     15,298     1,001,455   1,555,157  
 
Income (Loss) before noncontrolling interests
in Income of consolidated entities 657,021 66,362 1,065,606 1,788,989
Income (Loss) attributable to
noncontrolling interests 3,098 787 1,913 5,798
       
Economic Net Income (Loss) $ 653,923   $ 65,575   $ 1,063,693 $ 1,783,191  
 

 
KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
Nine Months Ended September 30, 2011
(Amounts in thousands)
           
Capital Markets Total
Private Markets Public Markets and Principal Reportable
Segment Segment Activities Segment Segments
 
Fees
Management and incentive fees:
Management fees $ 323,684 $ 64,144 $ - $ 387,828
Incentive fees   -     28,159     -   28,159  
Management and incentive fees   323,684     92,303     -   415,987  
 
Monitoring and transaction fees:
Monitoring fees 141,972 - - 141,972
Transaction fees 101,506 7,845 111,441 220,792
Fee credits   (110,129 )   (3,867 )   -   (113,996 )
Net monitoring and transaction fees   133,349     3,978     111,441   248,768  
 
Total fees   457,033     96,281     111,441   664,755  
 
Expenses
Compensation and benefits 139,570 33,967 19,376 192,913
Occupancy and related charges 32,792 2,870 994 36,656
Other operating expenses   115,076     11,649     7,883   134,608  
Total expenses   287,438     48,486     28,253   364,177  
 
Fee Related Earnings   169,595     47,795     83,188   300,578  
 
Investment income (loss)
Gross carried interest 170,096 (2,978 ) - 167,118
Less: allocation to KKR carry pool (69,106 ) 1,191 - (67,915 )
Less: management fee refunds   (15,594 )   -     -   (15,594 )
Net carried interest 85,396 (1,787 ) - 83,609
Other investment income (loss)   (185 )   598     85,306   85,719  
Total investment income (loss)   85,211     (1,189 )   85,306   169,328  
 
Income (Loss) before noncontrolling interests
in Income of consolidated entities 254,806 46,606 168,494 469,906
Income (Loss) attributable to
noncontrolling interests 1,885 480 2,086 4,451
       
Economic Net Income (Loss) $ 252,921   $ 46,126   $ 166,408 $ 465,455  
 

 
KKR
BALANCE SHEETS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
(Amounts in thousands, except per unit amounts)
     
As of September 30, 2012
Capital
Markets and
Private Public Principal Total
Markets Markets Activities Reportable
Segment

 

Segment

 

Segment Segments
 
Cash and short-term investments $ 309,703 $ 23,188 $ 1,105,414 $ 1,438,305
Investments - - 5,077,688 (a) 5,077,688
Unrealized carry 716,512 16,755 - 733,267
Other assets   202,256     72,721   63,021   337,998
Total assets $ 1,228,471   $ 112,664 $ 6,246,123 $ 7,587,258
 
Debt obligations $ - $ - $ 500,000 $ 500,000
Other liabilities   122,520     29,242   20,146   171,908
Total liabilities   122,520     29,242   520,146   671,908
 
Noncontrolling interests 1,340 602 18,627 20,569
       
Book value $ 1,104,611   $ 82,820 $ 5,707,350 $ 6,894,781
 
Book value per adjusted unit $ 1.57 $ 0.12 $ 8.13 $ 9.82
 
 
As of December 31, 2011
Capital
Markets and
Private Public Principal Total
Markets Markets Activities Reportable
Segment Segment Segment Segments
 
Cash and short-term investments $ 296,717 $ 8,087 $ 684,637 $ 989,441
Investments - - 4,743,406 4,743,406
Unrealized carry 419,523 1,447 - 420,970
Other assets   139,432     58,360   63,799   261,591
Total assets $ 855,672   $ 67,894 $ 5,491,842 $ 6,415,408
 
Debt obligations $ - $ - $ 500,000 $ 500,000
Other liabilities   128,590     8,153   49,329   186,072
Total liabilities   128,590     8,153   549,329   686,072
 
Noncontrolling interests (1,358 ) 729 19,381 18,752
       
Book value $ 728,440   $ 59,012 $ 4,923,132 $ 5,710,584
 
Book value per adjusted unit $ 1.06 $ 0.09 $ 7.14 $ 8.29
     
(a)   See Capital Markets and Principal Activities segment schedule of investments that follows.
 

 
KKR
CAPITAL MARKETS AND PRINCIPAL ACTIVITIES SEGMENT SCHEDULE OF INVESTMENTS
(Amounts in thousands, except percentage amounts)
     
As of September 30, 2012

 

 

Fair Value as
Fair a Percentage of

Investment

Cost

Value Total Investments
 
Co-Investments in Portfolio Companies of
Private Equity Investment Vehicles:
HCA Inc. 171,227 502,908 9.9 %
Dollar General Corporation 78,220 445,973 8.8 %
Alliance Boots GmbH 195,640 401,769 7.9 %
The Nielsen Company B.V. 134,603 268,254 5.3 %
NXP B.V. 207,963 197,067 3.9 %
Samson Resources Corporation 237,514 190,012 3.7 %
US Foods 100,000 140,000 2.8 %
KION Group GmbH 128,058 133,854 2.6 %
Biomet, Inc. 151,444 121,155 2.4 %
ProSiebenSat.1 Media AG 226,913 103,626 2.0 %
First Data Corporation 135,258 94,681 1.9 %
Energy Future Holdings Corp. 200,000 10,000 0.2 %
PagesJaunes Groupe S.A.   235,201   - 0.0 %
  2,202,041   2,609,299 51.4 %
 
Private Equity Investment Vehicles
KKR 2006 Fund L.P. 768,248 835,730 16.5 %
KKR European Fund III L.P. 187,339 211,126 4.2 %
KKR Millennium Fund L.P. 141,384 152,528 3.0 %
KKR Asian Fund L.P. 101,759 139,888 2.8 %
KKR European Fund II L.P. 85,140 78,651 1.5 %
KKR European Fund L.P. 60,922 38,430 0.8 %
KKR E2 Investors, L.P. 12,187 21,415 0.3 %
KKR China Growth Fund L.P. 3,611 4,511 0.1 %
Co-Investment Vehicles   528   574 0.0 %
  1,361,118   1,482,853 29.2 %
 
Private Equity Total   3,563,159   4,092,152 80.6 %
 
Energy & Infrastructure Investment Vehicles
Royalties and Drilling 87,734 87,568 1.7 %
Infrastructure Fund 18,466 18,968 0.4 %
Co-Investment Vehicles 10,477 12,159 0.2 %
Natural Resources   9,802   7,560 0.1 %
Energy & Infrastructure Total   126,479   126,255 2.4 %
 
Private Markets Total   3,689,638   4,218,407 83.0 %
 
Public Markets Investment Vehicles
Liquid Credit SMAs/Funds 170,300 192,926 3.8 %
Long/Short Equities Funds 100,000 100,268 2.0 %
Credit Relative Value Fund 50,000 51,275 1.0 %
Direct Lending 37,049 39,567 0.8 %
Special Situations Vehicles 17,498 18,875 0.4 %
Mezzanine Fund   14,834   16,708 0.3 %
Public Markets Total   389,681   419,619 8.3 %
 
Other   445,051   439,662 8.7 %
 
Total Investments $ 4,524,370 $ 5,077,688 100.0 %
 

 
KKR
CAPITAL MARKETS AND PRINCIPAL ACTIVITIES SEGMENT SCHEDULE OF INVESTMENTS, CONTINUED
(Amounts in thousands, except percentage amounts)
     

 

As of September 30, 2012

 

 

Fair Value as

 

a Percentage

Fair

of Total
Investment Cost Value   Investments
 
Significant Aggregate Investments: (a)
HCA Inc. $ 217,011 $ 619,641 12.2 %
Dollar General Corporation 108,539 590,330 11.6 %
Alliance Boots GmbH 228,769 463,417 9.1 %
The Nielsen Company B.V.   148,337   293,051 5.8 %
  702,656   1,966,439 38.7 %
 
Other investments   3,821,714   3,111,249 61.3 %
Total Investments $ 4,524,370 $ 5,077,688 100.0 %
 
 
Investments by Geography:
North America $ 2,879,868 $ 3,576,476 70.5 %
Europe 1,413,961 1,255,870 24.7 %
Asia-Pacific   230,541   245,342 4.8 %
Total Investments $ 4,524,370 $ 5,077,688 100.0 %
 
 
Investments by Industry:
Healthcare 701,501 1,293,013 25.5 %
Financial Services 1,206,380 1,150,483 22.7 %
Retail 363,406 865,917 17.0 %
Media/Telecom 753,184 533,645 10.5 %
Technology 385,564 396,436 7.8 %
Energy 699,463 366,875 7.2 %
Industrial 255,732 294,278 5.8 %
Consumer Products 91,635 97,255 1.9 %
Other   67,505   79,786 1.6 %
Total Investments $ 4,524,370 $ 5,077,688 100.0 %
     
(a)   The significant aggregate investments include investments in portfolio companies with individual fair values of 5% or more of the Capital Markets and Principal Activities segment investments balance as of September 30, 2012. The fair value figures include the co-investment and the limited partner and/or general partner interests in the underlying portfolio company.

 
KKR
ASSETS UNDER MANAGEMENT
(Amounts in thousands)
       
     
Private Public Total
Markets Markets Reportable
Segment Segment Segments

Quarter Ended September 30, 2012

 
June 30, 2012 $ 45,528,100 $ 15,960,800 $ 61,488,900
New Capital Raised 5,969,100 435,200 6,404,300
Distributions (2,639,800 ) (205,700 ) (2,845,500 )
Net Changes in Fee Base of Certain Funds (a) (1,327,900 ) - (1,327,900 )
Foreign Exchange 61,800 - 61,800
Change in Value   2,179,700     317,400     2,497,100  
September 30, 2012 $ 49,771,000   $ 16,507,700   $ 66,278,700  
 
 
Private Public Total
Markets Markets Reportable
Segment Segment Segments

Nine Months Ended September 30, 2012

 
December 31, 2011 $ 43,627,900 $ 15,380,700 $ 59,008,600
New Capital Raised 6,426,000 1,425,600 7,851,600
Distributions (5,926,800 ) (1,057,600 ) (b) (6,984,400 )
Net Changes in Fee Base of Certain Funds (a) (1,327,900 ) - (1,327,900 )
Foreign Exchange (1,400 ) - (1,400 )
Change in Value   6,973,200     759,000     7,732,200  
September 30, 2012 $ 49,771,000   $ 16,507,700   $ 66,278,700  
 
 
Private Public Total
Markets Markets Reportable
Segment Segment Segments

Trailing Twelve Months Ended September 30, 2012

 
September 30, 2011 $ 43,744,400 $ 14,976,400 $ 58,720,800
New Capital Raised 7,784,100 1,849,200 9,633,300
Distributions (7,970,600 ) (1,306,400 ) (c) (9,277,000 )
Net Changes in Fee Base of Certain Funds (a) (1,327,900 ) - (1,327,900 )
Foreign Exchange (71,600 ) - (71,600 )
Change in Value   7,612,600     988,500     8,601,100  
September 30, 2012 $ 49,771,000   $ 16,507,700   $ 66,278,700  
                           
(a)   Represents the impact of including certain funds entering the post-investment period including KKR 2006 Fund L.P.
(b) Includes $250.0 million of redemptions.
(c) Includes $450.0 million of redemptions.
 

 
KKR
FEE PAYING ASSETS UNDER MANAGEMENT
(Amounts in thousands)
       
     
Private Public Total
Markets Markets Reportable
Segment Segment Segments

Quarter Ended September 30, 2012

 
June 30, 2012 $ 37,858,300 $ 9,342,200 $ 47,200,500
New Capital Raised 5,725,100 434,100 6,159,200
Distributions (255,100 ) (91,400 ) (346,500 )
Net Changes in Fee Base of Certain Funds (a) (3,205,400 ) - (3,205,400 )
Foreign Exchange 210,100 - 210,100
Change in Value   21,200     226,900     248,100  
September 30, 2012 $ 40,354,200   $ 9,911,800   $ 50,266,000  
 
 
Private Public Total
Markets Markets Reportable
Segment Segment Segments

Nine Months Ended September 30, 2012

 
December 31, 2011 $ 37,869,700 $ 8,527,600 $ 46,397,300
New Capital Raised 6,179,700 1,440,100 7,619,800
Distributions (538,300 ) (594,200 ) (b) (1,132,500 )
Net Changes in Fee Base of Certain Funds (a) (3,205,400 ) - (3,205,400 )
Foreign Exchange 16,000 - 16,000
Change in Value   32,500     538,300     570,800  
September 30, 2012 $ 40,354,200   $ 9,911,800   $ 50,266,000  
 
 
Private Public Total
Markets Markets Reportable
Segment Segment Segments

Trailing Twelve Months Ended September 30, 2012

 
September 30, 2011 $ 37,936,800 $ 8,284,400 $ 46,221,200
New Capital Raised 7,457,400 1,762,400 9,219,800
Distributions (1,681,200 ) (838,000 ) (c) (2,519,200 )
Net Changes in Fee Base of Certain Funds (a) (3,205,400 ) - (3,205,400 )
Foreign Exchange (197,000 ) - (197,000 )
Change in Value   43,600     703,000     746,600  
September 30, 2012 $ 40,354,200   $ 9,911,800   $ 50,266,000  
                           
(a)   Represents the impact of including certain funds entering the post-investment period including KKR 2006 Fund L.P.
(b) Includes $250.0 million of redemptions.
(c) Includes $450.0 million of redemptions.
 

 
KKR
INVESTMENT VEHICLE SUMMARY* (UNAUDITED)
As of September 30, 2012
(Amounts in millions, except percentages)
                 
 
Investment Period Amount
Percentage
Committed by
Commencement Uncalled General Remaining Remaining
Date   End Date Commitment   Commitments   Partner   Invested   Realized   Cost   Fair Value

Private Markets

 
Private Equity Funds
North America Fund XI 9/2012 9/2018 $ 5,941.5 $ 5,941.5 4.1 % $ - $ - $ - $ -
China Growth Fund 11/2010 11/2016 1,010.0 674.9 1.0 % 335.1 - 335.1 404.5
E2 Investors (Annex Fund) 8/2009 11/2012 535.8 381.6 4.2 % 154.2 - 154.2 280.2
European Fund III 3/2008 3/2014 5,901.5 2,926.9 4.6 % 2,974.6 - 2,974.6 3,298.9
Asian Fund 7/2007 7/2013 3,983.2 860.5 2.5 % 3,122.7 732.0 2,612.9 4,551.2
2006 Fund 9/2006 9/2012 17,642.2 1,315.2 2.1 % 16,327.0 7,539.4 11,887.2 15,798.2
European Fund II 11/2005 10/2008 5,750.8 - 2.1 % 5,750.8 2,140.0 4,223.2 4,508.4
Millennium Fund 12/2002 12/2008 6,000.0 - 2.5 % 6,000.0 7,391.9 3,239.0 4,897.6
European Fund 12/1999 12/2005   3,085.4     - 3.2 %   3,085.4     8,325.6   95.2     466.0
Total Private Equity Funds 49,850.4 12,100.6 37,749.8 26,128.9 25,521.4 34,205.0
 
Co-Investment Vehicles Various Various   2,133.5     220.5 Various   1,913.0     1,574.7   1,431.5     2,268.3
Total Private Equity   51,983.9     12,321.1   39,662.8     27,703.6   26,952.9     36,473.3
 
Energy & Infrastructure
Natural Resources Various Various 1,222.9 802.1 Various 420.8 26.3 412.1 322.7
Infrastructure Various Various 1,041.2 791.7 4.8 % 249.5 1.7 249.5 257.1
Co-Investment Vehicles Various Various   1,862.4     679.8 Various   1,182.6     131.2   1,182.6     1,367.7
Energy & Infrastructure Total   4,126.5     2,273.6   1,852.9     159.2   1,844.2     1,947.5
                 
Private Markets Total   56,110.4     14,594.7   41,515.7     27,862.8   28,797.1     38,420.8
 

Public Markets

 
Special Situations Vehicles Various Various 1,858.1 439.6 Various 1,418.5 152.7 1,418.5 1,573.7
Mezzanine Fund 3/2010 8/2015 987.0 653.6 4.6 % 333.4 23.5 333.4 368.6
Lending Partners 12/2011 12/2014 286.8 158.0 29.0 % 128.8 - 128.8 137.6
                 
Public Markets Total   3,131.9     1,251.2   1,880.7     176.2   1,880.7     2,079.9
 
Grand Total $ 59,242.3   $ 15,845.9 $ 43,396.4   $ 28,039.0 $ 30,677.8   $ 40,500.7
 
 
* Reflects investment vehicles for which KKR has the ability to earn carried interest.
 

 

KKR

DISTRIBUTION CALCULATION

(Amounts in thousands, except unit and per unit amounts)

 

       
 
Quarter Ended Nine Months Ended
September 30, June 30, September 30, September 30, September 30,
  2012     2012     2011     2012     2011  
 
FRE (a) $ 90,704 $ 69,772 $ 98,242 $ 233,832 $ 300,578
Realized cash carry 100,145 39,360 12,937 184,432 118,889
Net realized principal investment income 145,700 301,580 81,001 499,898 235,525
Less: local income taxes (2,365 ) (3,307 ) (4,944 ) (9,258 ) (14,435 )
Less: noncontrolling interests   (1,310 )   (1,277 )   (1,840 )   (5,798 )   (4,451 )
Total Distributable Earnings   332,874     406,128     185,396     903,106     636,106  
 
Less: net realized principal investment income (145,700 ) (301,580 ) (81,001 ) (499,898 ) (235,525 )
         
Distributed Earnings   187,174     104,548     104,395     403,208     400,581  
 
Distributed Earnings to KKR & Co. L.P. (b) 66,015 36,401 34,075 140,216 128,817
 
Less: estimated current corporate income taxes (6,890 ) (4,268 ) (11,035 ) (15,180 ) (34,124 )
         
Distributed Earnings to KKR & Co. L.P., After Taxes $ 59,125   $ 32,133   $ 23,040   $ 125,036   $ 94,693  
 
Distribution per KKR & Co. L.P. common unit 0.24 0.13 0.10 0.52 0.42
 

Outstanding KKR & Co. L.P. common units

241,407,805 238,155,157 222,944,668
     
(a)   See Exhibit A for a reconciliation of such measure to financial results prepared in accordance with GAAP.
(b) Represents the amount of distributed earnings allocable to KKR & Co. L.P. based on its ownership in the KKR business as of September 30, 2012.
 

DISTRIBUTION POLICY

KKR intends to make quarterly cash distributions in amounts that in the aggregate are expected to constitute substantially all of the cash earnings of its investment management business each year in excess of amounts determined by KKR to be necessary or appropriate to provide for the conduct of its business, to make appropriate investments in its business and its investment funds and to comply with applicable law and any of its debt instruments or other agreements. KKR does not intend to distribute net realized principal investment income, other than certain additional distributions that KKR may determine to make. These additional distributions, if any, are intended to cover certain tax liabilities, as calculated by KKR. When KKR & Co. L.P. receives distributions from the KKR Group Partnerships (the holding companies of the KKR business), KKR Holdings receives its pro rata share of such distributions from the KKR Group Partnerships. For purposes of KKR’s distribution policy, its distributions are expected to consist of (i) FRE, (ii) carry distributions received from KKR’s investment funds which have not been allocated as part of its carry pool, and (iii) any additional distributions for certain taxes as described above. This amount is expected to be reduced by (i) corporate and applicable local taxes, if any, (ii) non-controlling interests, and (iii) amounts determined by KKR to be necessary or appropriate for the conduct of its business and other matters as discussed above.

The declaration and payment of any distributions are subject to the discretion of the board of directors of the general partner of KKR & Co. L.P. and the terms of its limited partnership agreement. There can be no assurance that distributions will be made as intended or at all or that such distributions will be sufficient to pay any particular KKR unit holder’s actual U.S. or non-U.S. tax liability.


KKR
Notes to Reportable Segments (Unaudited)

The reportable segments for KKR’s business are presented prior to giving effect to the allocation of income (loss) between KKR & Co. L.P. and KKR Holdings L.P. and as such represent the business in total.

KKR discloses the following financial measures in this earnings release that are calculated and presented using methodologies other than in accordance with GAAP. We believe that providing these performance measures on a supplemental basis to our GAAP results is helpful to investors in assessing the overall performance of KKR’s businesses. These financial measures should not be considered as a substitute for similar financial measures calculated in accordance with GAAP. We caution readers that these non-GAAP financial measures may differ from the calculations of other investment managers, and as a result, may not be comparable to similar measures presented by other investment managers. Reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are included elsewhere within this earnings release.

Fee related earnings (“FRE”) is comprised of segment operating revenues less segment operating expenses and is used by management as an alternative measurement of the operating earnings of KKR and its business segments before investment income. We believe this measure is useful to investors as it provides additional insight into the operating profitability of our fee generating management companies and capital markets businesses. The components of FRE on a segment basis differ from the equivalent GAAP amounts on a consolidated basis as a result of: (i) the inclusion of management fees earned from consolidated funds that were eliminated in consolidation; (ii) the exclusion of fees and expenses of certain consolidated entities; (iii) the exclusion of charges relating to the amortization of intangible assets; (iv) the exclusion of charges relating to carry pool allocations; (v) the exclusion of non-cash equity charges and other non-cash compensation charges borne by KKR Holdings or incurred under the KKR & Co. L.P. 2010 Equity Incentive Plan; (vi) the exclusion of certain reimbursable expenses; and (vii) the exclusion of certain non-recurring items.

Economic net income (loss) (“ENI”) is a measure of profitability for KKR’s reportable segments and is used by management as an alternative measurement of the operating and investment earnings of KKR and its business segments. We believe this measure is useful to investors as it provides additional insight into the overall profitability of KKR’s businesses inclusive of investment income and carried interest. ENI is comprised of: (i) FRE; plus (ii) segment investment income (loss), which is reduced for carry pool allocations and management fee refunds; less (iii) certain economic interests in KKR’s segments held by third parties. ENI differs from net income (loss) on a GAAP basis as a result of: (i) the exclusion of the items referred to in FRE above; (ii) the exclusion of investment income (loss) relating to noncontrolling interests; and (iii) the exclusion of income taxes.

After-tax ENI is used to measure KKR’s implied ENI on a fully diluted basis. We believe this measure is useful to investors as it provides an indication of KKR’s ENI as if all outstanding KKR Holdings units had been exchanged for common units of KKR & Co. L.P. After-tax ENI is calculated by deducting from ENI the implied income tax provision that has been calculated assuming that all income is allocated to KKR & Co. L.P., which would occur following an exchange of all KKR Holdings units for common units of KKR & Co. L.P. The assumptions and methodology used to calculate the implied income tax provision are consistent with those used in calculating the tax provision for KKR & Co. L.P. under GAAP. The implied income tax provision does not give effect to any tax savings or deductions that may result from the exchange of KKR Holdings units.

Total distributable earnings is the sum of (i) FRE, (ii) carry distributions received from KKR’s investment funds which have not been allocated as part of its carry pool and (iii) net realized principal investment income; less (i) applicable local income taxes, if any, and (ii) noncontrolling interests. Net realized principal investment income includes, with respect to KKR’s principal investments (i) realized investment gains and losses, (ii) dividend income and (iii) interest income, net of interest expense, earned from KKR’s principal investments. KKR does not intend to distribute net realized principal investment income other than certain additional distributions that KKR may determine to make, which are intended to cover certain tax liabilities, as calculated by KKR. See “Distribution Policy.” We believe this measure is useful to investors as it provides a supplemental measure to assess performance, excluding the impact of mark-to-market gains (losses), and amounts available for distribution to KKR unitholders, however, total distributable earnings is not a measure that calculates actual distributions under KKR’s current distribution policy.

Assets under management (“AUM”) represent the assets from which KKR is entitled to receive fees or a carried interest and general partner capital. We believe this measure is useful to investors as it provides additional insight into KKR’s capital raising activities and the overall activity in its investment funds and vehicles. KKR calculates the amount of AUM as of any date as the sum of: (i) the fair value of the investments of KKR’s investment funds plus uncalled capital commitments from these funds; (ii) the fair value of investments in KKR’s co-investment vehicles; (iii) the net asset value of certain of KKR's fixed income products; (iv) the value of outstanding structured finance vehicles; and (v) the fair value of other assets managed by KKR. KKR’s definition of AUM is not based on any definition of AUM that may be set forth in the agreements governing the investment funds, vehicles or accounts that it manages or calculated pursuant to any regulatory definitions.

Fee paying AUM (“FPAUM”) represents only those assets under management from which KKR receives fees. We believe this measure is useful to investors as it provides additional insight into the capital base upon which KKR earns management fees. This relates to KKR’s capital raising activities and the overall activity in its investment funds and vehicles, for only those funds and vehicles where KKR receives fees (i.e., excluding vehicles that receive only carried interest or general partner capital). FPAUM is the sum of all of the individual fee bases that are used to calculate KKR’s fees and differs from AUM in the following respects: (i) assets from which KKR does not receive a fee are excluded (i.e., assets with respect to which it receives only carried interest) and (ii) certain assets, primarily in its private equity funds, are reflected based on capital commitments and invested capital as opposed to fair value because fees are not impacted by changes in the fair value of underlying investments.

Committed dollars invested is the aggregate amount of capital commitments that have been invested by KKR’s investment funds and carry-yielding co-investment vehicles and is used as a measure of investment activity for KKR and its business segments during a given period. We believe this measure is useful to investors as it provides additional insight into KKR’s investment of committed capital. Such amounts include: (i) capital invested by fund investors and co-investors with respect to which KKR is entitled to a fee or carried interest and (ii) capital invested by KKR’s investment funds and vehicles.

Syndicated capital is the aggregate amount of debt or equity capital in transactions originated by KKR investment funds and vehicles, which has been distributed to third parties in exchange for a fee. It does not include capital committed to such transactions by carry-yielding co-investment vehicles, which is instead reported in committed dollars invested. Syndicated capital is used as a measure of investment activity for KKR and its business segments during a given period, and we believe that this measure is useful to investors as it provides additional insight into levels of syndication activity in KKR’s Capital Markets and Principal Activities segment and across its investment platform.

Uncalled commitments are used as a measure of unfunded capital commitments that KKR’s investment funds and carry-paying co-investment vehicles have received from partners to contribute capital to fund future investments. We believe this measure is useful to investors as it provides additional insight into the amount of capital that is available to KKR’s investment funds and vehicles to make future investments.

Adjusted units are used as a measure of the total equity ownership of KKR that is held by KKR & Co. L.P. and KKR Holdings and represent the fully diluted unit count using the if-converted method. We believe this measure is useful to investors as it provides an indication of the total equity ownership of KKR as if all outstanding KKR Holdings units had been exchanged for common units of KKR & Co. L.P.

Core interest expense is used by management as an alternative measurement of interest expense incurred by KKR on a segment basis and excludes interest expense related to debt obligations from investment financing arrangements related to certain of KKR’s private equity funds, investment vehicles and principal investments. These financing arrangements are not direct obligations of the general partners of KKR’s private equity funds or its management companies. On a segment basis, interest expense is included in other investment income. We believe this measure is useful to investors as it provides an indication of the amount of interest expense borne by KKR excluding interest expense that is allocated to KKR’s investment funds and vehicles and other noncontrolling interest holders. Additionally, we believe this measure is useful for analyzing KKR’s ability to service its debt obligations.

Book value is a measure of the net assets of KKR’s reportable segments and is used by management primarily in assessing the unrealized value of our investment portfolio, including carried interest, as well as our overall liquidity position. We believe this measure is useful to investors as it provides additional insight into the assets and liabilities of KKR excluding the assets and liabilities that are allocated to noncontrolling interest holders. Book value differs from the equivalent GAAP amounts on a consolidated basis primarily as a result of the exclusion of ownership interests attributable to KKR Holdings L.P.

Fee related EBITDA is comprised of FRE before the impact of depreciation of fixed assets and amortization of intangible assets and is used by management as a measure of the cash earnings of KKR and its business segments before investment income. We believe this measure is useful to investors as it provides additional insight into the amount of cash earnings generated by KKR’s management companies and capital markets businesses.

Cash and short-term investments represent cash and liquid short-term investments in high-grade, short-duration cash management strategies used by KKR to generate additional yield on our excess liquidity and is used by management in evaluating KKR’s liquidity position. We believe this measure is useful to investors as it provides additional insight into KKR’s available liquidity. Cash and short-term investments differ from cash and cash equivalents on a GAAP basis as a result of the inclusion of liquid short-term investments in cash and short-term investments.

     
KKR

EXHIBIT A

RECONCILIATION OF NET INCOME (LOSS) ATTRIBUTABLE TO KKR & CO. L.P. PER COMMON UNIT (GAAP BASIS - UNAUDITED)
TO AFTER TAX ENI PER ADJUSTED UNIT
(Amounts in thousands, except common unit and per common unit amounts)
 
 
Quarter Ended Quarter Ended Quarter Ended
September 30, 2012 June 30, 2012 September 30, 2011
 
Net income (loss) attributable to KKR & Co. L.P. per common unit $ 0.53 $ 0.62   $ (1.09 )
Weighted Average Common Units Outstanding 239,696,358 235,781,983 222,733,648
Net income (loss) attributable to KKR & Co. L.P. 127,411 146,261 (243,402 )
Plus: Net income (loss) attributable to noncontrolling

interests held by KKR Holdings L.P.

249,460 292,833 (484,879 )
Plus: Non-cash equity based charges 122,157 93,540 123,858
Plus: Amortization of intangibles and other, net 1,234 2,388 797
Plus: Income taxes   9,612   11,093     11,535  
Economic net income (loss) 509,874 546,115 (592,091 )
Less: Provision for income taxes   22,548   25,857     29,634  
Economic net income (loss) after taxes 487,326 520,258 (621,725 )
Adjusted units   702,252,548   700,720,686     683,024,625  
Economic net income (loss) after taxes per adjusted unit $ 0.69 $ 0.74   $ (0.91 )
 
Nine Months Ended Nine Months Ended
September 30, 2012 September 30, 2011
 
Net income (loss) attributable to KKR & Co. L.P. per common unit $ 1.98 $ (0.20 )
Weighted Average Common Units Outstanding 234,876,879 218,501,107
Net income (loss) attributable to KKR & Co. L.P. 464,108 (44,216 )
Plus: Net income (loss) attributable to noncontrolling

interests held by KKR Holdings L.P.

946,484 52,051
Plus: Non-cash equity based charges 330,037 386,533
Plus: Amortization of intangibles and other, net 4,785 3,164
Plus: Income taxes   37,777   67,923  
Economic net income (loss) 1,783,191 465,455
Less: Provision for income taxes   91,788   188,094  
Economic net income (loss) after taxes 1,691,403 277,361
Adjusted units   698,371,025   683,016,747  
Economic net income (loss) after taxes per adjusted unit $ 2.42 $ 0.41  
 
             
 
 
RECONCILIATION OF NET INCOME (LOSS) ATTRIBUTABLE TO KKR & CO. L.P. (GAAP BASIS - UNAUDITED)
TO ECONOMIC NET INCOME (LOSS), FEE RELATED EARNINGS AND FEE RELATED EBITDA
(Amounts in thousands)
 
Quarter Ended Quarter Ended Quarter Ended
September 30, 2012 June 30, 2012 September 30, 2011
 
Net income (loss) attributable to KKR & Co. L.P. $ 127,411 $ 146,261 $ (243,402 )
Plus: Net income (loss) attributable to noncontrolling

interests held by KKR Holdings L.P.

249,460 292,833 (484,879 )
Plus: Non-cash equity based charges 122,157 93,540 123,858
Plus: Amortization of intangibles and other, net 1,234 2,388 797
Plus: Income taxes   9,612   11,093     11,535  
Economic net income (loss) 509,874 546,115 (592,091 )
Plus: Income attributable to segment noncontrolling interests 1,310 1,277 1,840
Less: Investment income (loss)   420,480   477,620     (688,493 )
Fee related earnings 90,704 69,772 98,242
Plus: depreciation and amortization   3,273   3,093     2,147  
Fee related EBITDA $ 93,977 $ 72,865   $ 100,389  
 
Nine Months Ended Nine Months Ended
September 30, 2012 September 30, 2011
 
Net income (loss) attributable to KKR & Co. L.P. $ 464,108 $ (44,216 )
Plus: Net income (loss) attributable to noncontrolling

interests held by KKR Holdings L.P.

946,484 52,051
Plus: Non-cash equity based charges 330,037 386,533
Plus: Amortization of intangibles and other, net 4,785 3,164
Plus: Income taxes   37,777   67,923  
Economic net income (loss) 1,783,191 465,455
Plus: Income attributable to segment noncontrolling interests 5,798 4,451
Less: Investment income (loss)   1,555,157   169,328  
Fee related earnings 233,832 300,578
Plus: depreciation and amortization   8,919   7,397  
Fee related EBITDA $ 242,751 $ 307,975  
 

   
KKR

EXHIBIT A (CONTINUED)

RECONCILIATION OF KKR & CO. L.P. PARTNERS' CAPITAL (GAAP BASIS - UNAUDITED)
TO BOOK VALUE AND BOOK VALUE PER ADJUSTED UNIT
(Amounts in thousands, except common unit and per common unit amounts)
 
As of As of
September 30, 2012 December 31, 2011
 
KKR & Co. L.P. partners’ capital $ 1,842,531 $ 1,328,698
 
Plus: Noncontrolling interests held by KKR Holdings L.P. 5,044,473 4,342,157
 
Plus: Equity impact of KKR Management Holdings Corp. and other   7,777   39,729
 
Book value 6,894,781 5,710,584
 
Adjusted units 702,412,853 689,392,861
   
Book value per adjusted unit $ 9.82 $ 8.29
 
         
 
 
RECONCILIATION OF CASH AND CASH EQUIVALENTS (GAAP BASIS - UNAUDITED)
TO CASH AND SHORT-TERM INVESTMENTS (SEGMENT BASIS)
(Amounts in thousands)
 
As of As of
September 30, 2012 December 31, 2011
 
Cash and cash equivalents $ 1,278,354 $ 843,261
 
Plus: Liquid short-term investments 159,951 146,180
   
Cash and short-term investments $ 1,438,305 $ 989,441
 

 
KKR

EXHIBIT B

     
RECONCILIATION OF WEIGHTED AVERAGE GAAP COMMON UNITS OUTSTANDING TO WEIGHTED AVERAGE ADJUSTED UNITS
 
The following table provides a reconciliation of KKR's Weighted Average GAAP Common Units Outstanding to Weighted Average Adjusted Units.
 
Quarter Ended
September 30, 2012 June 30, 2012 September 30, 2011
Weighted Average GAAP Common Units Outstanding - Basic 239,696,358 235,781,983 222,733,648
Weighted Average Unvested Common Units(a) 17,950,264 16,725,819 -
Weighted Average GAAP Common Units Outstanding - Diluted 257,646,622 252,507,802 222,733,648
Adjustments:
Weighted Average KKR Holdings Units(b) 444,605,926 448,212,884 460,290,977
Weighted Average Adjusted Units 702,252,548 700,720,686 683,024,625
 
Nine Months Ended
September 30, 2012 September 30, 2011
Weighted Average GAAP Common Units Outstanding - Basic 234,876,879 218,501,107
Weighted Average Unvested Common Units(a) 14,482,321 -
Weighted Average GAAP Common Units Outstanding - Diluted 249,359,200 218,501,107
Adjustments:
Weighted Average KKR Holdings Units(b) 449,011,825 464,515,640
Weighted Average Adjusted Units 698,371,025 683,016,747
             
 
RECONCILIATION OF GAAP COMMON UNITS OUTSTANDING TO ADJUSTED UNITS
 
The following table provides a reconciliation of KKR's GAAP Common Units Outstanding to Adjusted Units.
 
As of As of
September 30, 2012 December 31, 2011
GAAP Common Units Outstanding - Basic 241,407,805 227,150,182
Unvested Common Units(a) 17,942,542 6,028,444
GAAP Common Units Outstanding - Diluted 259,350,347 233,178,626
Adjustments:
KKR Holdings Units(b) 443,062,506 456,214,235
Adjusted Units 702,412,853 689,392,861
 
             
(a)   Represents equity awards granted under the KKR & Co. L.P. 2010 Equity Incentive Plan. The issuance of common units of KKR & Co. L.P. pursuant to awards under its equity incentive plan dilutes KKR common unitholders and KKR Holdings pro rata in accordance with their respective percentage interests in the KKR business. For the three and nine months ended September 30, 2011, equity awards granted under the KKR & Co. L.P. 2010 Equity Incentive Plan have been excluded from the calculation of diluted earnings per common unit given the awards would have an anti-dilutive effect as a result of the net loss incurred in the respective periods.
(b) Common units that may be issued by KKR & Co. L.P. upon exchange of units in KKR Holdings L.P. for KKR common units.

Contacts

Kohlberg Kravis Roberts & Co. L.P.
Investor Relations:
Craig Larson
+1-877-610-4910 (U.S.) / +1-212-230-9410
investor-relations@kkr.com
or
Media:
Kristi Huller
+1-212-750-8300
media@kkr.com

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Contacts

Kohlberg Kravis Roberts & Co. L.P.
Investor Relations:
Craig Larson
+1-877-610-4910 (U.S.) / +1-212-230-9410
investor-relations@kkr.com
or
Media:
Kristi Huller
+1-212-750-8300
media@kkr.com